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Supercomputers Replace Wall Street Traders

Trading giant Morgan Stanley is planning to eliminate a number of positions by tapping computers that can make many trading decisions, according to the WSJ:

While the effort represents only a part of what the firm is doing to boost low returns in the business, the shift already has reduced the ranks of interest-rate and foreign-exchange traders on some desks by 10% to 20%.

Morgan Stanley’s head of interest-rate trading, Glenn Hadden, has told colleagues in recent months and that the trading floor of the future will surround a few traders with the hum of powerful machines. The unit, which has at least 200 staff according to industry estimates, has cut about 10% of staff on some trading desks. Morgan Stanley declines to discuss employment levels, but there according to these estimates the company employs more than 1,000 traders.

Just as they are in education, banking, and law, powerful computer technologies are beginning to fill the shoes of highly-trained employees on Wall Street.

Traditionally, automation has hit blue-collar manufacturing jobs hardest, but as computer-driven automation spreads, other professionals will begin to face the same pressures as their blue-collar peers.

This story is only beginning.

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  • thibaud

    Can political blogs be far behind?

    Soon natural language processing algorithms will scrape the New York Times, WSJ, FT and Economist for articles matching predefined tropes – California AND Budget, or Shooting AND Europe NOT America, say – and then spit out canned phrases (Your pensions are not safe, Change will come, Europeans are nasty hypocrites, etc.).

  • JimK

    Over at Zerohedge they call them HFT or algos, and just last week one of them went berserk and cost it’s owner over 400 million dollars.

  • Gerald Owens

    Well, one hopes that they are aware of the mess that Knight Capital Group’s software got them into.

    Interesting Thesis Thibaud: however, one would expect such coders to start small, like trollers to respond to articles matching pre-defined tropes…

  • Mrs. Davis

    Can political blogs be far behind?

    Idiot commenters will go first.

  • Steve W from Ford

    Working men and woman of the world need not long fear the pernicious effects of increased automation. As soon as machines start to make serious encroachment upon the upper echelons of the legal trade the jig will be truly, up!
    The elite of this country may very well be willing to see welders, auto mechanics and even teachers and accountants replaced by gears and cogs but let a major white shoe firm suffer “unfair” competition from the likes of “Gear, Wheel, Electron and Associates PLLC” and we will see the true power of Luddite-ism rise up in all its righteous glory!

  • Mick The Reactionary


    “Just as they are in education, banking, and law, powerful computer technologies are beginning to fill the shoes of highly-trained employees on Wall Street.”

    It is interesting that there is some? tentative? automation of highly non-trivial tasks of traders there is none in replacing trivial, highly repetitive and easily automatizable task of reading text book in front of some young people.

    If transportation industry had Guilds as powerful as Higher Edu industry, we would still be riding donkeys.

  • Tom Holsinger


    You might consider the implications:

    “Because as we showed today on not one but two occasions, humans no longer trade the casino formerly known as the ‘stock market’, we were glad to see that our old friend – the Whack-A-Mole algo – is back. As the following animated chart from Nanex shows, the algorithm is one which merely cycles in a broad, 10%+ sawtooth pattern blasting out empty quotes to feel the market in a test of other algos’ responsiveness, and during a period of 6000 quote blasts, executes just under 20 actual trades. We will launch a catalog of all the various algos as we see them. After all, now that nobody else is left, it makes sense to at least make the acquaintance of all those robotic parasites that are the only entities left quote stuffing each other to death all the while, in true Knightian fashion, levitate the general market higher.”

  • thibaud

    Actually, there’s no algorithm that will save Mead from his embarrassing habit of not bothering to read stuff he links to (let alone ponder it or apply some basic analysis to it).

  • memomachine

    You can do most of this now using RSS. Scan in RSS feeds by the thousands, scrape data from microblogs like Twitter et al. Assemble as needed.

  • Mick The Reactionary

    “there’s no algorithm that will save Mead from his embarrassing habit of not bothering to read stuff he links to”

    Don’t know about Mead, but Insti has done that for 10+ years and is fairly successful blogster.

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